US Capital Markets: REITs - Sun Communities vs. Invitation Homes

US Capital Markets: REITs Sun Communities vs. Invitation Homes

Nick Kunz

David Kruth, CFA US Capital Markets: REITs Columbia GSAPP MSRED

Sept 29, 2018

SUI / INVH / S&P 500 - Market Performance Comparison

SUI / INVH - Summary

The analysis conducted here examines two companies; Sun Communities (SUI) and Invitation Homes (INVH). The comparisons made are in an effort to afford additional insight into the decision making processes for US REIT investing.

The comparison table exhibited here first represents key performance indicators for SUI and INVH; second, it calculates a binary score given to each of the companies within each of the key performance indicators, whichever company outperforms the other in each of the categories is awarded a single point for that respective category. After all key performance categories were completed, a summation was conducted to determine the final outcome. SUI outscored INVH in total points. The results are the following, where SUI is recommended over INVH.

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Sun Communities (SUI)

Sun Communites (SUI) is a US REIT; owner and operator of manufactured housing and recreational vehicle communities. SUI owns 126,000 sites within 367 different communities across the United States and Canada.

Most of the companies housing products are age restricted. 72% of SUI’s revenue is driven by its manufactured housing sector with the other 18% from its recreational vehicle sector. SUI has a strong reputation, where the company has continued to acquire, developed, and redeveloped manufactured housing and recreational vehicle communities since 1975 with a current.

Advantages: ● Low CapEx ● Low Turnover ● Recession Tested

Disadvantages: ● Aging Consumer ● Local Zoning Barriers ● Niche Market

Invitation Homes (INVH)

Invitation Homes is a US REIT; owner and operator of single family detached housing. INVH owns 82,509 homes with a strategic focus in high growth markets throughout the United States with roughly 70% of its earnings from Florida and the West Coast. The company maintains its assets through a proprietary operating platform with mentionable plans to deleverage in the future. INVH is a relatively new company. It has not established and solid reputation, as it recently conducted its first IPO in 2017.

Advantages: ● Favorable Demographic Trends (Millennials) ● Large Potential Upside ● Wide Market

Disadvantages: ● Early Stage Stock ● Slow Financial Performance ● Centralized Geographic Market (Sun Belt)

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SUI - Earnings Analysis - 18E / 19E

Exhibited here is the anticipated NOI for SUI in both 2018 and 2019 at years end based on Q2 2018 reports.

INVH - Earnings Analysis - 18E / 19E

Exhibited here is the anticipated NOI for INVH in both 2018 and 2019 at years end based on Q2 2018 reports.

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SUI - Valuation Analysis 18E

Exhibited here is the anticipated current value of SUI based on Q2 2018 reports..

INVH - Valuation Analysis 18E

Exhibited here is the anticipated current value of INVH based on Q2 2018 reports.

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SUI - Debt Analysis - 18E / 19E

Exhibited here is the anticipated debt for SUI in both 2018 and 2019 at years end based on Q2 2018 reports.

INVH - Debt Analysis - 18E / 19E

Exhibited here is the anticipated debt for INVH in both 2018 and 2019 at years end based on Q2 2018 reports.

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SUI / INVH - Implied Cap Rate Analysis - 18E

Exhibited here is the implied cap rate and enterprise valuation for SUI and INVH in both 2018 and 2019 at years end based on Q2 2018 reports.

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